• GBP/USD softens to near 1.3250 in Thursday’s early European session. 
• The negative outlook for the pair prevails below the 100-day SMA, with bearish RSI momentum. 
• The initial support level is seen at 1.3202; the immediate resistance level to watch is 1.3311.  

The GBP/USD pair trades in negative territory around 1.3250 during the early European trading hours on Thursday. The British Pound (GBP) edges lower against the US Dollar (USD) amid widening monetary policy divergence between the Bank of England (BoE) and the US Federal Reserve (Fed). The US weekly Initial Jobless Claims report and the Fedspeak will be in the spotlight later in the day. 

BoE policymaker Alan Taylor said on Tuesday it was unclear that it ‌would be practical for the central bank to do a single rate hike to tame inflation without fueling unwarranted market speculation of further increases.

Traders are pricing in nearly a 33 basis points (bps) of monetary tightening from the BoE by year-end and more than 100 bps by the end of 2027, according to LSEG-compiled data, although analysts broadly expect much more limited action.

Softer-than-expected US Personal Consumption Expenditures (PCE) inflation data weigh on the Greenback and act as a tailwind for the major pair. Financial markets now see an about 38.2% probability of a rate hike ‌in October, down from about 45% before the US PCE data, according to the CME FedWatch Tool. 

Pound outlook brightens as MUFG flags stronger UK growth and reverse-Brexit potential

Analysts at MUFG note that the UK growth backdrop has improved, with the bank having “raised their forecast for growth in Q3 to 0.4% up from their previous projection of 0.1% set back in July.” They argue that “stronger growth will encourage the BoE to tighten policy soon if higher energy prices conte to prove more persistent,” and highlight that one senior official at the central bank “judges that risks to the inflation outlook are ‘more titled to the upside’.” Beyond the near-term policy implications, MUFG also points to the evolving political landscape, suggesting that greater openness to closer EU ties “opens up the possibility for a potential reverse-Brexit trade for the pound in the future.”

Kashkari questions policy tightness as resilient economy keeps Fed hawkish

Fed’s Kashkari delivered a notably hawkish-leaning message, with a FXS Speechtracker score of 7.1/10, above the 6.2/10 historical average, underscoring concern that inflation near 3% remains “too high” despite recent data. The emphasis on a resilient economy, strong consumer spending, and broad job availability, alongside doubts about how tight policy really is and a potentially higher neutral rate, reinforces a bias toward further tightening, highlighted by penciling in one more hike this year and another in 2027 while still hoping to tame inflation with only modest action. Overall, the tone suggests the Fed is not yet convinced that current policy settings are sufficiently restrictive to guarantee a return to target.

The FXS Fed Sentiment Index slipped by 0.42 points to 143.28, signaling a modest pullback in perceived hawkishness even as the index remains firmly above the neutral 100 mark. This configuration indicates that, despite a slight softening versus recent readings, Fed communication as captured by the FXS Fed Sentiment Index and FXS Speechtracker still resides in clear hawkish territory, consistent with Kashkari’s openness to additional rate hikes and an elevated neutral rate.

Technical Analysis: GBP/USD remains bearish below the 100-day SMA in the near term

In the daily chart, GBP/USD maintains a bearish near-term bias as it holds below the 100-day simple moving average (SMA) and the Bollinger Bands 20-period middle band. The pair is edging closer to the lower Bollinger band, while the Relative Strength Index (RSI) at 33.20 hovers just above oversold territory, hinting that downside momentum remains in place but could be nearing exhaustion.

On the downside, immediate support level is located at the September 29 low of 1.3202, followed by Bollinger lower band near 1.3140. A daily close below this floor would expose the November 20, 2025 low of 1.3038 and then the 1.3000 psychological level. 

On the topside, initial resistance stands at the September 30 high of 1.3311, en route to the Bollinger middle band at 1.3385, and the 100-day SMA at 1.3415. A more distant upside barrier is located at the upper Bollinger band around 1.3630.